Netmarble’s Nexon bid in the works for two months

Feb 01,2019

Netmarble confirmed Thursday it is in the running to acquire a major stake in Nexon and has been working on the deal for months.

The announcement came just one day after Kakao said it is considering a bid for the international gaming company. For both Kakao and Netmarble, the acquisition could create synergies with their existing game businesses, according to analysts.

“Netmarble reviewed the acquisition of Nexon two months ago,” Netmarble said in a written statement. The company added that the final go-ahead decision came about a month ago.

Nexon was founded in Korea in 1994. It moved its headquarters to Tokyo in 2005 and is now traded on the Tokyo Stock Exchange. The company was first to introduce a graphic massively multiplayer online role-playing game (Mmorpg) and currently has 80 game titles.

Netmarble is now Korea’s No. 3 game company by market capitalization, behind Nexon and NCSoft.

Citing investment banking sources, the Korean press has said that Nexon founder Kim Jung-ju is offering 98.64 percent of NXC, Nexon’s holding company. NXC owns a 47.98 percent stake in Nexon. The company has not officially confirmed a sale, but press reports say that the deadline for a deal is set for next month.

Netmarble, which was established in 2000, is listed on the Korea Exchange. It was the No. 5 mobile game publisher globally in 2018, according to App Annie.

Despite its size, analysts question whether it has the financial wherewithal to buy the NXC stake, which is valued at 10 trillion won ($8.9 billion). Netmarble currently has 1.65 trillion won in cash and cashable equivalents.

“Nexon has intellectual property and a stable capacity to generate cash,” said Ahn Jae-min of NH Investment & Securities. “The question is how they are going to raise 10 trillion won of capital.”

Kakao is also seen coming up short, with about the same amount of cash on hand. It is expected that the companies would both have to form some sort of consortium to get the deal to work.

Another possible acquirer is China’s Tencent, owner of the QQ messaging app. It owns 17.7 percent of Netmarble and 6.7 percent of Kakao. As regulations on gaming in China become more onerous, the company has been expanding its global presence.

Interest in the stake is in part a response to potential foreign bidders, and one of Netmarble’s motivations is to keep ownership in Korea.

“We believe that the tangible and intangible values of Nexon are very important assets to the country,” Netmarble said. “If Nexon is sold overseas, the Korean game industry and ecosystem could be damaged and its competitiveness weakened.”